As the mega case between Apple and Samsung kicks off in the courts, the rest of the electronics industry continues to struggle with the growing threat of patent infringement lawsuits. Unfortunately, this situation is nothing new.
The current cases involving the handset makers is reminiscent of the epic battles between many semiconductor vendors, such as AMD vs. Intel, Broadcom vs. Qualcomm, and the list goes on.
The current situation is heightened by the vast dollar value associated with the multi-billion annual unit shipments of mobile devices, but the outcome is just as predictable. The two sides will eventually settle with some form of license agreement and a licensing fee.
Most often, the result is a cross-licensing agreement because of patent infringement counter claims. As with the battles of the past, the outcome of this battle will have little impact on the choices of consumers or the resulting direction of the market. The battle will, however, likely delay innovation and potentially raise prices to consumers ultimately pay for devices over the next few years.
The underlying issue that arises from these battles is a broken patent system. The current US patent system allows for the protection of almost any concept or idea. While it is intended to protect the intellectual property of engineers and designers, it also places more constraints on the industry and a greater burden on the court system.
There should be a reasonable test for patents, such as determining if the concept is truly unique or something that is inherently obvious for a particular application, usage model, or device. The problem arises when making such determinations requires not only an understanding of the broader implementations, but also some foresight for a fast moving industry. Another issue is the ability to patent very basic ideas and menial tasks.
Occasionally, patents get struck down following legal fights from competitors, but like all other battles with patents, this is often a multi-year and multi-billion fight through the courts.
The patent system also allows for unused patents to be acquired by patent trolls, which are typically a group of lawyers that have acquired unused patents and use them to sue companies for royalty fees. These too can be challenged, but it is often less expensive for companies to strike a deal with the trolls rather than face another legal battle.
Short of fixing the inadequacies with the patent system, the industry continues to attempt to use it to a competitive advantage and work around it. The outcome is that the company with the early and most patents is awarded with an additional revenue stream, such as Texas Instruments and Qualcomm, which have previously wielded their patents on the rest of the industry.
As the industry evolves to new standards and technologies, these revenue streams eventually dry up and most of the leading companies in a particular technical segment ultimately sign broad cross-licensing agreements because it becomes almost impossible to avoid infringing on a patent of competitor.
As many have pointed out, the current legal battle is much broader than between just Apple and Samsung, it involves Google and all of the handset vendors using the Android operating system, many of which are claiming patent infringements against Apple.
The current and continuing legal battles will have no impact on consumers or the market overall. Consumers can and will continue to spend with the solutions that provide them the best balance between value and usage experience; the handset companies will be forced into broader licensing agreements; the lawyers will continue to be the greatest beneficiaries of the fight; and the industry will continue to find workarounds for an imperfect patent system.
While it is easy to argue for revisions to the patent system, it is difficult to determine the standards that should be used. Rightfully, Innovators should be compensated for their time and investment, especially when it drives a major inflection point in an industry. However, there should be some standard for testing that level of innovation and the bar for future patents should be higher as the industry matures. As for the current battles in mobile devices, look for at least two to three more years of legal wrangling before an armistice.
Jim McGregor TIRIAS Research Founder/Principal Analyst
At this point i would agree the PTO needs to be scrapped. It's just too subjective a thing to say what is truely "novel" and worthy of protection. But on the otherhand the patent system may destroy itself. Are companies really getting a worthwile ROI on the legal expenses of these suits? At some point maybe they will give up on the lawsuits, then after that they will stop wasting money on the filings. I mean if you take the 100 million you spend on these lawsuits and just pour that money instead into the R&D can you beat the competitor to market with a better product and make a better ROI?
Interesting (and perhaps a little extreme) that the noted jurist Richard Posner says the patent system should be ditched: http://trib.in/NUoGU6.
Clearly our approach needs to be reconsidered based on the volume of patent applications and the chronic understaffing of the PTO.
Apple did this to themselves when they turned litigious. We all admire their products, just not their attitude. There is no mob mentality that Apple did not create themselves. There are many VERY big hitting IP holders Apple needs to steer clear of and doing what they are doing is only going to draw attention to their willful infringement of so many other players' IP. Good luck to them, but given their short but very successful history in this business, I really don't fancy their chances against 3 decade industry veterans. They should have shut up and carried on printing their money.
Why is it that we have this mob mentality... jumping on some one, the moment they have made it big and got out of the pack. We always do it, did it to IBM, to Microsoft and now Apple. All these players came up through sheer technological innovations and definitely, market smarts without which it becomes next to impossible to compete in a cut throat market. Isn't it the basis of capitalism...work hard and may the best person win. Let's not punish Success. Go Apple
I have never really understood the anti-Apple sentiment that is so prevalent out there currently. Of course, it is not so different from the anti-Microsoft sentiment, or anti-IBM sentiment or ... pick any market leader.
Call the IPhone warmed over technology all you want, but at the end of the day, Apple did EFFECTIVELY what no other company had accomplished in the past. Technology convergence in the mobile space. Sure RIM was close with Blackberry and PALM was close, but they never pulled all the pieces together effectively and hence why PALM no longer exists and RIM continues its decline from it's lofty heights.
In fact, RIM, who capitalized on a first level of convergence, phone and email, completely missed the next stage of convergence with media, entertainment, and yes, general computing.
Even Nokia, who in some ways was ahead of both RIM and Apple, missed the underlying concept of a computing platform, i.e. ease of development and user experience.
As opposed to constantly shooting down Apple's success, perhaps it would be more valuable to understand how they achieved that success and how it can be applied to one's own company and daily activities.
And by the way, this is not the first time Apple has tried to bludgeon the competition they couldn't out compete. They sued Microsoft for copying the 'design' they copied from PARC. The difference between then and now is patent 'reform' hadn't happen so they only had copyright to use as a weapon and lost.
They are overly aggressive going after small companies and individuals when they feel threatened. The latest I am aware of is having filing a criminal complaint against an artist who made a dubious decision to install software on computers in an Apple store to take photos of customers. In the resulting Secret Service investigation, they confiscated his computer equipment and he had to get an attorney. While I don't think the artist was correct, a simple phone call or cease and desist letter probably would have been more than adequate and they could have escalated to a criminal complaint. Instead Apple's starting point was the criminal complaint and sending DMCA take down requests (on somewhat dubious grounds) to the public websites used to host the photos.
This is typical of Apple's infamous overreaction to perceived violations of their 'property'. In reality they are focused on protecting their profit margin using intellectual protection laws as bludgeons.
I don't really agree with this. Apple really just leveraged the iPod as a cellphone platform. Everyone that had an iPod could get an iPhone that would replace the iPod and their cellphone.
Like many other Apple products, the iPod focused on the ascetics on top of mediocre hardware with large margins. The true innovation was incorporating iTunes to sell the 'software' which was probably more focused on the profit than anything else.
As you may be able to tell, I don't have much respect for Mr. Jobs. I never met him personally but, having worked for a company that made Macintosh peripherals, I am intimately aware of how he operated. He was nothing more than a marketer with a good sense of aesthetics. And like most marketers, he would sell his mother if he thought he could make a buck.